California rebound held back by inland areas

By IBT Staff Reporter On 09/20/11 AT 3:10 PM

California will trail the nation's economic recovery as its once fast-growing inland areas struggle for years to come with a dearth of jobs and devastated housing markets, a report released on Tuesday said.

At the same time, economic strength in coastal California may reverse years of flight to inland areas that defined recent migration patterns in the most populous U.S. state, the report by the UCLA Anderson Forecast unit added.

As a result, California's growth will be sub-par compared with the rest of the nation, the report added.

What this means is a slight increase in the unemployment rate in California over the next two quarters, followed by a slow trajectory towards, but not reaching, single-digit unemployment the following five quarters, the report said.

The UCLA Anderson Forecast unit also said in its report that the significant downward revision in its U.S. forecast implies a greater slowing of California's overall economic growth, previously expected to outpace the nation's.

Ongoing cuts to state and local government payrolls along with doldrums in construction, retail and financial sectors will restrain California's growth, keeping the state's unemployment rate in the double digits well into 2014.

California's Employment Development Department said on Friday the state's unemployment rate ticked up to 12.1 percent in August from 12.0 percent in July.

Jobs are most sorely lacking in inland California, where the Central Valley and Riverside and San Bernardino counties east of Los Angeles saw the state's most torrid growth over the last decade.

A building boom of affordable housing, financed by easy money often with risky mortgages, fueled inland California's growth by luring residents from coastal areas with pricey housing.

But with the housing industry's collapse, payrolls of all kinds in inland California shrank, triggering some of the highest metro-area unemployment rates in the nation.

Foreclosures have also seized inland housing markets, sending home values reeling in recent years.

Dismal inland housing and jobs markets are keeping many Californians who may have moved east only a few years ago along the coast, where rents have dropped, homes have become more affordable and where job prospects are brighter.

Inland California may benefit from some spillover from the coastal economy, but the UCLA Anderson Forecast report said the gap between the two Californias is likely to widen.

That raises the potential for negative population growth in Inland California, which faces a slow recovery extending into 2017 and beyond, the report said.